meet the accountant personal and corporate insolvency in scotland
TRANSCRIPT
Meet The AccountantPersonal and Corporate
Insolvency in Scotland
Case OperationsUpdate
Case Operations Update
• General Statistical Update • Debtor Applications for Bankruptcy• AiB In-house Management Update
John Cook Head of Case Operations
General Statistical Update
John Cook Head of Case Operations
Total
07/08
Total
08/09
YTD
09/10
Projected
09/10
Bankruptcy Awards
6158 14777 6274 15058
Protected Trust Deeds
7509 7633 4196 10070
DAS
DPPs
442 908 496 1190
Corporate Insolvencies
1069 971 366 878
Awards By Type
Total
07/08
Total
08/09
Projected
09/10
Debtor Application
2511
41%
11421
77%
12113
80%
Creditor
Petition
3235
52%
2914
20%
2568
17.5%
Trustee
Petition
412
7%
442
3%
377
2.5%
John Cook Head of Case Operations
Debtor Bankruptcy Applications
• Regulations commenced April 2008• LILA Route• Checking Procedure• Ongoing Administration
John Cook Head of Case Operations
Debtor ApplicationsStatistics
Total
08/09
YTD
09/10
Projected
09/10
Net Applications 12192 5076 12182
LILA Awards 9417 3949 9478
A.I Awards 2004 1098 2635
Rejections 383 255 612
Cases Converted 797 223 535
John Cook Head of Case Operations
In House Case Management
Total
07/08
Total
08/09
Heritage £1.16m £1.97m
Other Assets £0.10m £0.755m
Contributions(IPAs from April 08)
£0.43m £0.84m
John Cook Head of Case Operations
Insolvency Policy
Policy Development Branch
• Since 2007 we have had policy responsibility for all non-operational policy related issues;
• Provide Ministers with policy advice on legislation;
• Liaise with stakeholders, other areas of SG, with UK Government and EU;
• Major work associated with implementation of the Bankruptcy and Diligence etc. (Scotland) Act 2007;
• Conduct reviews of how legislation is working in practice;
• Develop new legislation.
Sharon Bell Head of Policy Development
The Impact of the Recession
• Ministers looking for ways to help • Less credit and lower equity = fewer options for
dealing with debt• Impact on businesses and employment• Increase in debt problems in the working economy• “Iceberg bankrupts”
Sharon Bell Head of Policy Development
‘Serving the People of Scotland’
• In January we supported the Debt Action Forum
- provided secretariat support
- provided reports and background information
• AiB 2009-2010 Business Plan - the following key areas were recognised under ‘Developing Policy’ :
– Continue to implement the Bankruptcy and Diligence etc. (Scotland) Act 2007
– Develop and implement Bankruptcy changes
– Review Corporate Insolvency in Scotland
Sharon Bell Head of Policy Development
Sharon Bell Head of Policy Development
DiligenceBankruptcy and Diligence etc.
(Scotland) Act 2007
Diligence
• Commenced on 1 April 2008:part 6 - diligence on the dependence, part 7 -interim attachment, part 9 - changes to arrestment of earnings, part 12 - changes to summary warrant, time to pay and charge to pay
• Commenced on 22 April 2009:part 5 - changes to inhibition and part 10 - changes to arrestment
• Working to commence from late October/early November 2009: part 8 – money attachment,
• April 2010 part 14 – admiralty actions and part 15 – actions for removing
• amend Earnings Arrestment Regulations to introduce new deduction tables
Sharon Bell Head of Policy Development
• Allows attachment of money owned by the debtor (but not money in a dwelling house)
• Makes provision for the process of money attachment• Provides for the issue by the sheriff of a Payment Order • Once a payment order has been granted the sheriff
officer will be authorised to bank cheques and distribute funds to the creditor
• To be commenced late October or early November 2009
Diligence Money Attachment
Sharon Bell Head of Policy Development
• Makes changes to the Administration of Justice Act 1956, the law relating to the admiralty actions and the arrestment of ships
• Introduces definition of maritime lien and clarifies what constitutes an admiralty action
• Clarifies jurisdiction and provides for where an arrestment of a ship and/or its cargo can be arrested
Diligence Admiralty Actions
Sharon Bell Head of Policy Development
• Part 15 applies general rules for actions of removing without changing the legal grounds on which a person can be removed
• The procedure and practice will be set down in Act of Sederunt
• The service of a charge for removing will be introduced before any removing can take place
• The charge will effectively give 14 days notice of removing (although this period can be varied or dispensed with by the sheriff where circumstances warrant it)
Diligence Actions for Removing
Sharon Bell Head of Policy Development
• Land attachment introduced by 2007 Act to replace adjudication for debt
• Not yet commenced• Consultation to be issued shortly in recognition of the
commitment to exempt the main dwelling house from land attachment
Diligence Land Attachment
Sharon Bell Head of Policy Development
Bankruptcy:
DAS
LILA route
Protected Trust Deeds
Debt Action Forum
Sharon Bell Head of Policy Development
Debt Arrangement Scheme
• Still believe that change is needed to improve access• Earlier this year - proposed legislation to improve DAS• Now - Consultation on the details• Aim to report in December 2009• Changes not expected until Spring 2010
Sharon Bell Head of Policy Development
Number of approved DAS Debt Payment Programmes
1
128108
444
908
398
0
100
200
300
400
500
600
700
800
900
1000
2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 (ytd : Apr-Jul)
DAS Number of Approved DPPs
Sharon Bell Head of Policy Development
DAS Approved Money Advisers
There are currently 104 approved money advisers in Scotland.
60% of approved money advisers submitted DPPs during the last year.
Sharon Bell Head of Policy Development
DAS Value of Debts in the DPPS
340
140
3714
4 10
50
100
150
200
250
300
350
400
Under £25K £25K-£50K £50K-£75K £75K-£100K £100-£125K £125K+
Value of Debt
No
of
peo
ple
in
th
e d
eb
t ra
ng
e
On average, debtors owe £24,362 and DPPs are set up to run for just over 8 years.
The average monthly payment in a DPP is £246. Payments range from just under £10 to around £1,500 per month.
Sharon Bell Head of Policy Development
DAS Length of DPPS
0
50
100
150
200
250
300
1-5 years 5-10 years 10-15 years 15-20 years 20-30 years 30+ years
Sharon Bell Head of Policy Development
DAS Consultation
• Access to DAS
• Administration
• Consent Rules & Fair and Reasonableness
• Debt Payment Programmes
• Single Debts
• Payment Distribution
Sharon Bell Head of Policy Development
LILA route into Bankruptcy
Findings of the Review:
• The LILA route is effective in providing debtors, who could not previously access bankruptcy, with debt relief
• The number of individuals applying for their own bankruptcy has increased significantly since the introduction of the LILA criteria
• 95% of the people using the LILA route are on benefits
• More females than males satisfied the LILA criteria when applying for bankruptcy
Sharon Bell Head of Policy Development
LILA Bankruptcies Value of Debt
Distribution of total debts in LILA cases
0
100
200
300
400
500
600
number of LILA Cases
Sharon Bell Head of Policy Development
On average, debtors owe £17,288
LILA Bankruptcies Top 10 Creditors
0
100
200
300
400
500
600
700
800
900
1000
S eries 1
Sharon Bell Head of Policy Development
Bankruptcies Future?
• Unlikely to change the Debtor Application Fee for 2010-11
• Unlikely to change the LILA criteria
• Debt Action Forum report and SG response
Sharon Bell Head of Policy Development
Protected Trust DeedsSome findings of the review
• 2008 changes introduced have had no effect on the number of PTDs registered
• Average total debt included in a PTDs of £32,652
• Average estimated dividend proposed to creditors in individual PTDs is 17p in the pound
Sharon Bell Head of Policy Development
PTD Main CreditorsTop 10 Creditors by Debt Owed (plus credit union figure)
10.1%
6.5%
4.8%
3.8%
3.0%
2.5%2.1%
1.9%
0.2%
3.6%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
HBOS RBS Lloyds TSB BarclaysBank
MBNA Capital One NorthernRock
ClydesdaleBank
HMRC All CreditUnions
Pe
rce
nta
ge
of
tota
l d
eb
t o
we
d t
o c
red
ito
rs
Sharon Bell Head of Policy Development
PTD Debtor Income Profile
Monthly Income of Debtors
0
50
100
150
200
250
300
Up
to £
200
£200
.01
to £
400
£400
.01
to £
600
£600
.01
to £
800
£800
.01
to £
1000
£100
0.01
to £
1200
£120
0.01
to £
1400
£140
0.01
to £
1600
£160
0.01
to £
1800
£180
0.01
to £
2000
£200
0.01
to £
2200
£220
0.01
to £
2400
£240
0.01
to £
2600
£260
0.01
to £
2800
£280
0.01
to £
3000
£300
0.01
to £
3200
£320
0.01
to £
3400
£340
0.01
to £
3600
£360
0.01
to £
3800
£380
0.01
to £
4000
£400
0.01
to £
4200
£420
0.01
to £
4400
£440
0.01
to £
4600
Monthly Income Range
Nu
mb
er o
f D
ebto
rs
Sharon Bell Head of Policy Development
PTD IP FeesTrustee Fees
0 113
123
279
413
112
21 13 112
36
238
0
50
100
150
200
250
300
350
400
450
CreditorFee
£0 to£1000
£1000.01to £2000
£2000.01to £3000
£3000.01to £4000
£4000.01to £5000
£5000.01to £6000
£6000.01to £7000
£7000.01to £8000
£8000.01to £9000
£9000.01to £10000
£10000.01to £20000
Greaterthan
£20000
Nu
mb
er
of
Tru
ste
e F
ees
Total Number of Trust Deeds = 1262
Sharon Bell Head of Policy Development
• Average anticipated trustee fees and outlays amount to £4,937
• Total debt write off for PTDs registered in the year 2008/09 is and estimated £205m
• Over 33% change in first 6 – 12 month
PTD findings continued
Sharon Bell Head of Policy Development
PTDs the Future?
Minister will meet with IPs and Governing Bodies
Consultation – which will look at PTDs:• Having a different term – 3yr to 5yr• Providing dividends more regularly to creditors• Excluding certain assets• Trustee Fee to outcome relationship• Where AiB becomes the Trustee
Legislative changes – subject to consultation
Sharon Bell Head of Policy Development
Consolidation of Bankruptcy Acts
• Bring the 1985,1993 and 2007 Acts into one consolidated Act
• Reformat, renumber and modernise language used• Update all forms and regs• Update guidance
Sharon Bell Head of Policy Development
Debt Action Forum
Sharon Bell Head of Policy Development
Debt Action Forum
• Short life working group of academics and experts from a diverse group of stakeholders
• Chaired by Fergus Ewing MSP, Minister for Community Safety
• Wide ranging remit to look at debt solutions in light of current financial climate
• Sub-group with specific focus on repossessions
• Final report published in June 2009
Sharon Bell Head of Policy Development
• Ministerial led forum- members by Ministerial invite• Discussed a range of debt related issues including:
– Trust Deeds– Protecting Debtors– Heritage– Debt Collection and Debt Purchase– Access to Bank Accounts– Advice Provision– The debtor’s car– Repossessions
Sharon Bell Head of Policy Development
Debt Action Forum
Debt Action Forum Scottish Government Response
• Extending the protection to the family home in bankruptcy to trust deeds
• Extending the period for which a sheriff may postpone the sale of a family home from one to three years
• Introducing the requirement for trustees in bankruptcy and trust deeds to notify the local authority of the sale of a family home
• Excluding specified assets from protected trust deeds with the creditors agreement
Sharon Bell Head of Policy Development
• Extending the access to bankruptcy by allowing a certified route that is fair and open
• Exempting any essential vehicle valued at £3,000 or less from vesting
• Introducing new grounds for bankruptcy restrictions to encourage debtors to take responsibility for their on going liabilities
• Removing the requirement to advertise bankruptcy in the Edinburgh Gazette
Sharon Bell Head of Policy Development
Debt Action Forum Scottish Government Response
Repossessions Potential area for legislation
• SG colleagues will be looking at the recommendations of the Repossessions Report
• Build on the protection available through the Mortgage Rights (Scotland) Act 2001 in repossession cases.
• Lenders to show that they have considered every reasonable alternative
Sharon Bell Head of Policy Development
Debt Action ForumWhat happens now?
Initiatives that don’t need legislation
• Work with lending banks to ensure basic banking facilities for debtors
• SG colleagues liaising with UK Government and other stakeholders over lending and debt collection practices
• SG colleagues, SLAB and Advice Sector looking further into advice provision
• Primary legislation – Bankruptcy (Scotland) Act 1985– A slot in the Parliament timetable– A Committee will look for evidence
• Subordinate Legislation changes - Exempting any essential vehicle valued at £3,000 or less from vesting
Sharon Bell Head of Policy Development
Debt Action ForumWhat happens now?
Consultation to be issued shortly:• In recognition of the Government’s commitment to exempt the main
dwelling house from land attachment
• Pick up on the report of the Debt Action Forum to consider what changes, if any, might be appropriate to the way in which the family home is treated in bankruptcy
• Consider the treatment of ‘unofficial’ tenants
• Whether AiB should have some form of advice giving role. This could allow AiB to offer a view on the appropriateness of a particular course of action and recommend full engagement with money advice
• Whether the voting rights for creditors in trust deeds should be amended to limit the ability of a minority of creditors to prevent the protection of a trust deed
Sharon Bell Head of Policy Development
Debt Action ForumWhat happens now?
Sharon Bell Head of Policy Development
Corporate Insolvency
Corporate Insolvency
What we have done so far –
• Insolvency Amendment Rules• Limited Liability Partnership Regulations• Corporate Insolvency website – including forms
Sharon Bell Head of Policy Development
What we are going to do next -
• New stand alone Insolvency Rules• Modernisation programme• Insolvency Procedures for SCIOs• Liquidator of last resort
Sharon Bell Head of Policy Development
Corporate Insolvency
Sharon Bell Head of Policy Development
Policy Development
The Future?
Engaging with change
• Legislative process• Input to consultations• Focus Groups and feedback from stakeholders• Where are the gaps in the current debt solutions?• Reviewing other Countries solutions – sharing best
practice
Sharon Bell Head of Policy Development
The Policy Cycle
Sharon Bell Head of Policy Development
Question & Answer
Gillian Thompson
Rosemary Winter-Scott
David Wallace
John Cook
Sharon Bell
AiB Panel
Thank you